If you watch television or listen to the radio, you will have heard about the Federal government’s home renovation stimulus scheme. Since it was announced there has been an outcry about the sensibilities regarding the scheme. Another way of saying sensibilities is ‘what were they drinking?’ That is, the politicians and public servants who concocted the scheme?
This morning Senator Jacqui Lambie was interviewed on ABC Radio National by Hamish McDonald about the scheme. Jacqui who is known to ‘shoot from the hip’ said, ‘what the hell is in their cigars?’ The sub text here relates to the 2014 photograph of the then Treasurer, Joe Hockey, and Finance Minister, Mathias Cormann, smoking cigars (outside of The Treasury in Canberra) before the announcement of the budget. It was a little downtime after all their hard work – balancing the budget!
While Jacqui is concerned about what they were smoking, another question to ask is ‘what were they drinking?’ It is late at night, they are tired, and must have forgotten that port is not for a ballooned wine glass, but one of those miniature glasses!
On the other hand, if they were not smoking or drinking, what were they thinking? Even for an armchair observer, like me, it does not take long to find pitfalls in the scheme. First of all, there are income caps. It is not for low income earners. An individual must earn $125,000 or a couple $200,00 per annum, to qualify. Then, a building contract must be signed between 4 June and 31 December 2020 – 6 months.
Then, the renovation must cost between $150,000 and $750,000, on your principal place of residence, and the value of the existing property (house and land) must not exceed $1.5 million. Time for me to take another sip, just thinking about it! Then construction must commence within three months of the contract date. If you want more information about the scheme read the FAQ’s by clicking here.
In the formation of the scheme did anyone think about the current level of job insecurity in the COVID-19 environment? Australia is officially in a recession. Did anyone miss that point? Now it is time to take a big gulp. Australian households already carry a high level of personal debt. There may be some spin off for the construction and building industry, but will it be enough? To borrow $150,000 or more for a home renovation with the economy the way it is points to huge financial risks. Instead of creating more home comfort, it might have the adverse effect of creating more financial discomfort.
If the stimulus dollars targeted social infrastructure, including social housing this would have a benefit for the building industry and for the less advantaged in our communities. The difference to people’s lives would be significant. It would give them a place to live, a home and a life with dignity.
The home renovation stimulus scheme might achieve a short term hit to the construction and building sector. But, does spending $25,000 per application, as an incentive to create more debt for households, make sense? As Jacqui mentioned in her interview, there are many ‘shovel ready’ infrastructure projects that would have more immediate impact on the economy. I am sure we will hear more about the renovation stimulus scheme in the weeks and months ahead. But all I can hear right now, reverberating in my head, is ‘what were they drinking’?